Being Like Buffett With Mutual Funds

By Brendan Conway

This weekend brings “Woodstock for Capitalists“: The annual meeting of Warren Buffett’sBerkshire Hathaway (BRKA, BRKB). Shareholders and value-investing wonks convene in Omaha, Neb., for a weekend of happy note that, among other things, Berkshire’s stock has been whupping the S&P 500 even more soundly than usual.

Go to the lengths known asBuffettology if you’re into that sort of thing, or just hear out David Kathman of Morningstar, who’s compiled a list of ten funds with the highest percentage of top-10 Berkshire holdings at the end of 2009, 2010, 2011 and 2012.

Reuters

Warren Buffett

They’re Buffett’s bro’s, so to speak, and while there’s a certain gimmickry and imprecision in mimicry of any famous investor’s strategy, these funds offer the virtue of avoiding the risk of owning one company’s stock — Berkshire Hathaway — not to mention the time-tested value strategies they offer. Here are a few of Kathman’s funds.

Vanguard Dividend Appreciation Index (VDAIX): A strategy of high-quality companies delivering years of consistent dividend increases. Besides its minuscule 0.20% management fee, this fund stands out for delivering a slimmer loss in the financial crisis than a standard index fund, a distinction which was also true of ETF companion Vanguard Dividend Appreciation (VIG). Investors shouldn’t be looking for a fat yield — about 2% at present — and they should be ready to undershoot the plain-vanilla index when stocks rise.

Yacktman Focused fund (YAFFX): This fund is known for investing in big, inexpensive companies for the long haul, hence the similarities to Buffett’s approach at Berkshire. Its 23% 2008 loss was similar to Vanguard’s, but the encore was stellar, a nearly 63% rise in 2009. Morningstar’s Kevin McDevitt last year argued in favor of choosing Yacktman (YACKX) over this one, on account of an expense ratio that was an annual 50 basis points (0.50%) lower. McDevitt called the focused version “a more concentrated version of the larger fund.”

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